How Are Microcap Stocks Different From Other Stocks?
Lack of public information. Often, the biggest difference between a microcap stock and other stocks is the amount of reliable publicly-available information about the company. Most large public companies file reports with the SEC that any investor can get for free from the SEC’s website. Professional stock analysts regularly research and write about larger public companies, and it is easy to find their stock prices on the Internet or in newspapers and other publications. In contrast, the same information about microcap companies can be extremely difficult to find, making them more vulnerable to investment fraud schemes and making it less likely that quoted prices will be based on full and accurate information about the company.
No minimum listing standards. Companies that list their stocks on exchanges must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders. In contrast, companies quoted on the OTC Bulletin Board (OTCBB), OTC Link LLC (OTC Link) or Global OTC generally do not have to meet any minimum listing standards, but are typically subject to some initial and ongoing requirements. You can find the OTCBB’s eligibility requirements for stocks at http://www.finra.org/industry/faq-otcbb-frequently-asked-questions and you can find additional information about OTC Link and Global OTC at www.otcmarkets.com and www.globalotc.com , respectively.